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The markets took a bit of a breather yesterday after a very hectic start to the week, the EM’s currencies that had been hit so hard on Monday showed a bit of fight back during the course of the trading day and the equity markets came back better bid. The dollar still remained strong with the Dxy remaining close to yearly highs and most of the majors lingered at recent lows.

The Turkish Lira was still in focus and talk of central bank action helped the currency to gain back some of its recent catastrophic losses. This helped some of the other EM’s to gain back some lost ground as well, the South African rand in particular which is now trading back under 14.50 having hit 15.50 on Monday. It must be noted that the initial diplomatic issue that caused the recent Turkish move has not been resolved and both the US and Turkey are standing firm on their sides of the argument, any escalation could lead to further volatility in the short term

It looks set for a mixed start in Asia today and investors will continue to monitor the risk situation, especially with regard to EM currencies. Many of the Asian EM currencies are still trading at vulnerable levels and the focus will turn to Indonesia later in the session with it’s central bank due to make it’s next rate announcement. In Australia, we have the latest Wage Price Index numbers being released this morning and with the Aussie looking weak, bulls will be hoping for a strong number to lend it some short term support.

There’s some strong data due later today with the UK’s CPI data out early in the London session and then the US Retail Sales numbers close to the New York open. Both are important data releases but unless we see a large deviation from expectation they will have little affect on either central banks current thinking.

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